Hi Akyshya, I uploaded a question called Mountain Air A,B,C and put a deposit of $10.00 on this problem on 1/14/15 which is still unanswered brought to the attention of a moderator. I need the problem reviewed and answered. The answers are done but question (C ). I really need just (C ) if all the other answers to A, and B, match on the excel file.
Outsourcing (Make-or-Buy) Decision Mountain Air Limited manufactures a line of room air purifiers. Management is currently evaluating the possible production of an air purifier for automobiles. Based on an annual volume of 10,000 units, the predicted cost per unit of an auto air purifier follows. Direct materials $ 8.00 Direct labor 1.50 Factory overhead 7.00 Total $ 16.50 These cost predictions include $50,000 in facility-level fixed factory overhead averaged over 10,000 units. The completed air purifier units include a battery-operated electric motor, which Mountain Air assembles with parts purchased from an outside vendor for $2.00 per motor. Mini Motor Company has offered to supply an assembled battery-operated motor at a cost of $5.00 per unit, with a minimum annual order of 5,000 units. If Mountain Air accepts this offer, it will be able to reduce the variable labor and variable overhead costs of the auto air purifier by 50 percent. (a) Calculate the net benefit (cost) of outsourcing the electric motors from Mini Motor Company. Total factory overhead for 10,000 units = $7.00 per unit * 10,000 units ==> $70,000 Variable portion of factory overhead = $70,000 total - $50,000 fixed ==> $20,000 Variable factory overhead per unit = $20,000/10,000 units = $2 per unit Direct materials Direct labor Variable factory overhead Fixed factory overhead Total costs To make Per unit $8.00 $1.50 $2.00 Total $80,000 $15,000 $20,000 $50,000 $165,000 To buy Per unit $11.00 $0.75 $1.00 Net (cost) of outsourcing = 177500-165000 ==> Total $110,000 [Note: Per unit cost = $8 - $2 + $5] $7,500 $10,000 $50,000 $177,500 ($12,500) (b) Calculate the net benefit (cost) of outsourcing the electric motors from Mini Motor Company, assuming the motor-assembly space could be rented to another company for $20,000 per year. To make Per unit $8.00 $1.50 $2.00 Direct materials Direct labor Variable factory overhead Fixed factory overhead Total costs Less: Rental revenue if outsourced Net costs Total $80,000 $15,000 $20,000 $50,000 $165,000 To buy Per unit $11.00 $0.75 $1.00 $165,000 Net benefit of outsourcing = 165,000 - 157,500 = Total $110,000 [Note: Per unit cost = $8 - $2 + $5] $7,500 $10,000 $50,000 $177,500 ($20,000) $157,500 $7,500 Outsourcing (Make-or Buy) Decision Mountain Air Limited manufactures a line of room air purifiers. Management is currently evaluating the possible production of an air purifier for automobiles. Based on an annual volume of 10,000 units, the predicted cost per unit of an auto air purifier follows. Direct materials......................... $8.00 Direct labor......................................1.50 Factory overhead............................7.00 Total................................................$16.50 The cost predictions include $50,000 in fixed factory overhead averaged over 10,000 units. The completed air purifier units include a battery operated electric motor, which Mountain air assembles with parts purchased from an outside vendor for $2.00 per motor. Mini Motor Company has offered to supply an assembled battery-operated motor at a cost of $5.00 per unit, with a minimum annual order of 5,000 units. If Mountain air accepts this offer, it will be able to reduce the variable labor and variable overhead costs of the auto air purifier by 50 percent. Required (a.) Determine whether Mountain Air should continue to make the electric motor or outsource it from Mini Motor Company.(Analyze the relevant costs of making the \"motors\" not the entire air purifier.) the net cost of outsourcing equals 12,500. Answer: (b.) If it could otherwise rent the motor-assembly space for $20,000 per year, should it make or outsource this component? Net benefit of outsourcing = 165,000 - 157,500 = 7500 Answered: This possibility seems more cost efficient to outsource. (c.) Answer: What additional factors should it consider in deciding whether to make or outsource the electric motors? I feel it should consider the total cost to make or buy a product per unit
